High dollar demand from Indian companies to redeem their foreign debt obligations, coupled with month-end requirements of oil importers, on Thursday pushed the rupee-dollar exchange rate beyond 51 levels, last seen two months ago. The absence of dollar supply from the Reserve Bank of India (RBI) in the spot market also triggered a rush in the market as importers covered their positions, fearing further depreciation in the Indian currency. Satyajit Kanjilal, founder and CEO of Forexserve, said the rupee was under pressure again for a multitude of factors.

“Indian companies are mopping up the greenback to meet their debt repayment obligations. There is also demand from oil companies to prepare them before the effect of the Iran sanctions kicks in,” said Kanjilal.

According to Bloomberg data, the rupee ended at 51.22 after trading between 50.77 and 51.27 against the greenback. Traders said the central bank intervened in the forwards market to the tune of $400-500 million but was absent from the spot market. “Probably, the RBI is selling dollars in the forwards market and rolling over maturing contracts so that rupee liquidity is not impacted,” said a foreign exchange dealer with a domestic brokerage.

The rupee had closed at 50.67 a dollar yesterday. The forward premia rates softened over the previous day's level and the six-month forward premium ended lower at 7.41 per cent.

According to data, RBI has been participating in the forwards segment since November 2011. In January, it sold $1.3 billion in the forwards market. RBI Deputy Governor Subir Gokarn had attributed the structural rupee liquidity tightness to the central bank’s past foreign exchange market interventions.

The liquidity deficit in the domestic banking system is around Rs 1.2-1.3 lakh crore, which is above twice the RBI’s comfort level of one per cent of net demand and time liabilities.

“Oil companies are buying about $500 million on average every day. Dollar demand is huge if you add foreign debt repayments, too,” said a treasury official of a public sector bank. RBI had raised concerns on the burden of FCCBs that would come up for redemption in the Financial Stability Report released in June 2011. According to the central bank, FCCBs worth $3.48 billion would mature in 2011-12.

The Indian currency has lost 4.5 per cent since the start of this month and close to 15 per cent since the start of the financial year. “This is despite positive foreign fund inflows and general weakness in the dollar across other currencies,” said Abhishek Goenka, MD & CEO, India Forex Advisors.

FIIs have invested close to Rs 8,500 crore in Indian debt and equity markets since the start of this month. On Thursday, the dollar index against six major global currencies was trading at 79.9 levels, lower than the 80.19 levels a week ago.